Del Monte credit facility seen drawing enough investor interest, "priced to move"

By Sara Rosenberg

New York, Nov. 15 - Del Monte Foods Co.'s deal, the largest of the week of Nov. 18, grabbed much of the bank loan market's attention towards the end of last week. Del Monte is holding a bank meeting for managing agents on Monday and one for retail on Thursday.

"I think the meeting should spark some interest from all those invited," a market professional said. "The deal is priced to move and I believe it will attract a pretty significant amount of interest."

The facility consists of a $350 million six-year revolver with an interest rate of Libor plus 350 basis points, a $250 million six-year term loan A with an interest rate of Libor plus 350 basis points and a $470 million eight-year term loan with an interest rate of Libor plus 400 basis points.

There will be $300 million of senior secured floating rate notes, which will basically act like a term loan. Interest on the floating rate notes is Libor plus 425 basis points.

Also, there will be a $300 million term loan A-1 with an interest rate of Libor plus 350 basis points. This term loan, which is not being syndicated to institutions, will act like a bridge loan and is expected to be repaid once the bond deal is sold.

"If they can't get the bonds done then [the term loan A-1] stays in place and is pari passu to our debt," a fund manager previously told prospect News. "I'd like to see it subordinated to our debt. It's better for senior lenders if there's less senior secured debt."

Bank of America, JPMorgan Chase, UBS Warburg and Morgan Stanley are the lead banks on the deal that will be used to help fund the merger with certain H.J. Heinz Co. businesses.

Del Monte is a San Francisco processed food company.

Constar International Inc. finally sold its initial public offering of 10.5 million shares of common stock at $12 per share and priced its $175 million aggregate principal amount of senior subordinated notes due 2012 at 98.51% of par with a coupon of 11.00% to yield 11.25% to maturity.

The company's bank loan, which was launched relatively recently, was contingent upon these two other transactions taking place.

The $250 million loan consists of $150 million seven-year term loan B with an interest rate of Libor plus 450 basis points and a $100 million five-year revolver with an interest rate of Libor plus 300 basis points. The term loan B was originally priced at Libor plus 275 basis points. It has been flexed up twice so far, the first time to Libor plus 325 basis points and the last time to Libor plus 450 basis points, according to a market source.

The loan has call protection at 103, 102 and 101 and is being sold at 981/2.

Citibank and Deutsche Bank are the lead banks on the deal.

Proceeds from the equity, bonds and bank debt will be used to fund the partial spin off of Constar from Crown Cork & Seal.

Constar is a Philadelphia producer of PET plastic containers for food and beverages.

Meanwhile, National Waterworks Inc.'s bank loan is now oversubscribed following the recent changes that took place to the terms, according to a syndicate source.

Pricing on the on the $250 million seven-year term loan B was flexed up to Libor plus 400 basis points from Libor plus 375 basis points.

Upfront fees are 50 basis points.

The loan also contains yield protection, which states that the existing debt has to be within 25 basis points of the new debt. The reason behind this yield protection is the $50 million incremental facility that is built into the term sheet, according to a syndicate source. This way investors are protected from the syndicate pricing the add-on at interest rates that would make the existing paper trade lower in the secondary market, like was recently seen in the Terex Corp. fiasco.

The $75 million six-year revolver was left unchanged with an interest rate of Libor plus 300 basis points.

Goldman Sachs, JPMorgan and UBS Warburg are the lead banks on the deal, which will be used to help fund the acquisition of US Filter Distribution Group Inc. by a company jointly owned by JPMorgan Partners and Thomas H. Lee Partners.

National Waterworks is a Palm Desert, Calif. provider of water and wastewater systems.

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